Correlation Between Medical Facilities and Laurentian Bank

Can any of the company-specific risk be diversified away by investing in both Medical Facilities and Laurentian Bank at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Medical Facilities and Laurentian Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Medical Facilities and Laurentian Bank, you can compare the effects of market volatilities on Medical Facilities and Laurentian Bank and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Medical Facilities with a short position of Laurentian Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Medical Facilities and Laurentian Bank.

Diversification Opportunities for Medical Facilities and Laurentian Bank

0.69

Correlation Coefficient

Medical Facilities  Laurentian Bank

Poor diversification

The 3 months correlation between Medical and Laurentian is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Medical Facilities and Laurentian Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laurentian Bank and Medical Facilities is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Medical Facilities are associated (or correlated) with Laurentian Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laurentian Bank has no effect on the direction of Medical Facilities i.e., Medical Facilities and Laurentian Bank go up and down completely randomly.

Pair Corralation between Medical Facilities and Laurentian Bank

Assuming the 90 days horizon Medical Facilities is expected to generate 4.01 times less return on investment than Laurentian Bank. In addition to that, Medical Facilities is 1.19 times more volatile than Laurentian Bank. It trades about 0.05 of its total potential returns per unit of risk. Laurentian Bank is currently generating about 0.26 per unit of volatility. If you would invest  2,642  in Laurentian Bank on April 22, 2025 and sell it today you would earn a total of  445.00  from holding Laurentian Bank or generate 16.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Medical Facilities  vs.  Laurentian Bank

Medical Facilities

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Medical Facilities are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Medical Facilities is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Laurentian Bank

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Laurentian Bank are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Laurentian Bank displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Medical Facilities and Laurentian Bank

The main advantage of trading using opposite Medical Facilities and Laurentian Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medical Facilities position performs unexpectedly, Laurentian Bank can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Laurentian Bank will offset losses from the drop in Laurentian Bank's long position.

The idea behind Medical Facilities and Laurentian Bank pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.